TRALAC - Trade Law Centre

What to do to Woo Investors...

Friday, 01 July 2005

Source: Financial Mail (South Africa)

Unlike SA's divided business movement, corporate US more often than not speaks with a unified and strong voice; the US Chamber of Commerce represents 3m US businesses and is influential in lobbying the US government in the interests of its members.

So it's good news and, possibly, a sign of things to come, when its president and CE, Tom Donohue, says more US companies want to invest in Southern Africa because this region offers an "abundant supply" of natural resources, and SA is at the business heart of the region.

This means the number of US companies with a presence in SA is set to soar from 600 at present and may add momentum to much-needed foreign direct investment (FDI) and job creation. As it is, US companies already employ about 100 000 people in SA.

Donohue sees particularly strong opportunities in SA for the 20m-odd small US companies, which provide "most of the jobs, innovation and invention in the US. Small US companies employ more people than all the Fortune 500 companies put together," he says .

"When you look closely at SA and Southern Africa, you still see a lot of obstacles to starting a business, though the SA government seems committed to reducing the number of steps it takes to start a business.

"You can't put all sorts of brakes on people who are trying to start a small business. You have to facilitate it.

"The only thing that creates buying power, jobs and innovation is a strong, stimulated and growing small business community," says Donohue.

This message should hit home, particularly as it comes a week after a local study found that red tape costs SA business about R79bn/year and is particularly onerous on smaller companies, which struggle to cope with numerous labour, sector-specific and local government regulations.

Donohue says it is not just geographic proximity to government power (the US Chamber of Commerce offices are just opposite the White House) that has enabled business to successfully lobby government to reduce taxes and unnecessary regulations - it's a strong and unified voice .

Donohue says SA chambers of commerce need to organise themselves and analyse which government policies stand in the way of boosting small business .

" Without fighting with government, they should be able to convey and lobby those views with government on behalf of members," says Donohue.

Only 20 months ago, SA witnessed the signing of agreements to create a single, non racial voice for business, which led to the formation of two umbrella bodies, Business Unity SA (Busa) and the Chamber of Commerce & Industry SA (Chamsa).

"If the SA chambers truly speak with one voice, government will have to listen to them and they are going to be a force to be reckoned with," says Donohue.

He says the SA government's strong support for free trade and enterprise has convinced foreign companies to look for more opportunities in SA and the region. But he suggests that the commercial relationship could be strengthened if the two countries signed a free-trade agreement.

"In the past, companies were a bit reluctant to invest more in SA. Now it looks like it is going to work. Investment goes where it is welcome, profitable and safe," says Donohue.

Two-way trade between SA and the US already exceeds US$9bn, but Donohue says that to accelerate the movement of US businesses to SA and the entire Southern African Development Community (SADC) , government should speed up the signing of a free trade deal with the US.

SA and the US have been negotiating the trade agreement for about two years . Donohue believes that if they do reach an agreement , it would be passed by the US congress almost immediately .

The strong backing by the US of the African Growth & Opportunity Act (Agoa) shows the political support of these objectives, Donohue says.

Agoa allows duty-free access for many African products from qualifying sub-Saharan countries into the US and has boosted Africa's exports.

Donohue cautions that SA's black economic empowerment programme will not be effective it fails to attract or retain skilled people in all disciplines . "So you must figure out a way to keep the skills you need. One way of doing this is to allow them opportunities to create small companies, without unduly restricting them," he says.